You can read the SPP paper here

The UK must stop treating pensions and housing as separate policy issues to address the growing retirement adequacy challenge, the Society of Pension Professionals (SPP) has argued. They’re bang on

In a new paper, Home Truths: Rethinking Retirement Wealth, the SPP highlighted a “structural mismatch” between the £3.84trn of housing wealth held by UK retirees and an aggregate annual retirement income deficit of more than £48bn against moderate living standards. These numbers confuse me and spoil the report, especially as Pension UK’s “moderate living standards” assume no housing costs

The paper argued that many of the assumptions underpinning the current pensions system, particularly that most people will enter retirement mortgage-free as homeowners, increasingly fail to reflect the circumstances facing younger generations. Isn’t the question what older people pay in rent and in loans taken out to meet living expenses? My thinking is that housing will become affordable soon enough, property is no longer increasing in value.

It noted that homeownership rates have fallen from around 71 per cent in the early 2000s to around 65 per cent in 2024/25, while 31 per cent of future retirees are expected to fall below the Pensions UK minimum Retirement Living Standard (RLS). It is the cost of housing that makes pensions hard to save for. This is where the problem starts. Why is renting so expensive – why do Landlords (including Local Government) charge so much in certain areas. Here is where something can be done. Let’s listen to Harry Scoffin.

By 2040, the SPP claimed that, although 12.9 million people aged 65 and over are projected to be owner-occupiers, 2.2 million are expected to be private tenants and a further 1.8 million social tenants. This is not a problem in other European countries where the mantra that my house is my pension has not quite caught on!

The challenge is particularly acute for lifelong renters, with the paper citing estimates that an individual renting throughout retirement would require an additional £269,000 in pension savings to meet their rental costs. Or rely on Pension Credit to meet the bills – we have a fall back which isn’t taken up enough, elderly people are missing out.

The SPP therefore called for the RLS and value for money (VFM) framework to be updated to explicitly account for rental and mortgage costs in later life, and for housing wealth to be integrated more closely into retirement guidance, including through MoneyHelper and Pension Wise. This is quite right, we have a system that values pensions in a way that doesn’t make sense and 2/3 of people told a recent Hargreaves Lansdown that they didn’t have a pension other than what comes from the state. We need to be paying people pensions in retirement not offering them a pot of money. Pot’s of money are hard to convert to income to meet household coss.

It stressed that the current separation between mortgage advice, equity release and financial advice made holistic decision-making more difficult, while housing and retirement planning were also treated separately within government-backed guidance.

In practice, those who have least in retirement have a fall-back system which is why we do not have overt poverty. The problems are not with poverty but a level higher – those who have had a lifetime of earning and find they have no income in retirement other than £1,000 per month coming from the state. That does not meet bills and the pot may not last long. The current system is not good for medium and long term budgeting 

Once pensions dashboards are fully established, the SPP suggested that housing wealth could be incorporated to provide savers with a combined view of their later-life resources. This is a bit naive, people have a good idea of their housing costs and the pension dashboard will be about establishing in people’s minds the income they have going forward. The income bit is the hard bit. 

Alongside changes for those approaching retirement, the paper considered the growing tension younger savers face between building a house deposit and saving adequately into a pension. This is where auto-enrolment is important. People who opt-out of pension saving are either very arrogant or very stupid (or both). If you opt-out you will have to have a good reason to complain later in life!

Rather than allowing widespread early access to pension savings, the SPP suggested exploring changes to employer contribution structures, including whether matching contributions could be redesigned to help younger workers build deposits without accessing their core pension pots. Not a bad idea – but shouldn’t employers be looking to make their pensions work a little better paying pensions and not pots? The tax-free sum is a very useful source of cash to settle bills created over a lifetime!

It also pointed to sidecar savings as a potential way to improve short-term financial resilience while protecting long-term pension savings. Yes, a good thing – especially if done with auto-enrolment – see SUEZ ‘s work

The paper further argued that pension capital could play a greater role in increasing UK housing supply, although it stressed that capital availability itself was not the primary constraint on institutional investment. This is good – money for New Town’s has been suggested on here by Thomas Aubrey and Con Keating

Instead, it said pension schemes require projects that are sufficiently scalable and deliverable, and that can be assessed within conventional investment risk frameworks.

The SPP therefore recommended improving planning certainty, increasing the visibility of the housing pipeline and developing standardised investment vehicles that could make residential housing more accessible to institutional investors. This blog agrees with all of this and goes into a lot more detail!

However, it cautioned that

“pension capital cannot substitute for effective housing policy”,

warning that measures aimed at increasing access to housing finance could simply increase affordability pressures unless accompanied by genuine increases in supply.A fairly obvious point – but I agree!

The paper also proposed exploring a one-off stamp duty relief for older people downsizing their homes, alongside a significant expansion in age-appropriate retirement housing. Stamp duty is going to get a genuine review by this Government I reckon. Equity release is not the same as selling the property,

Around 7,000 retirement homes are currently built each year, according to figures cited by the SPP, compared with a recommended target of 50,000. The reason for this is that companies that build housing find it better to sit on the land, this needs to change

Looking further ahead, the SPP suggested exploring whether homes sold to fund social care could be acquired into public or social ownership and retrofitted as affordable housing, potentially using pension capital to finance acquisition and refurbishment. Agreed, this can also involve annuity providers.

It acknowledged that such a model would present significant challenges, including determining acquisition prices, retrofit costs, geographic mismatches between properties and housing need, and interaction with inheritance and social care policy. It will mean IFAs working with consultants ; Government working with insurers and pension schemes. Those who build houses and those who manage housing working together and everyone working in the same direction

SPP Financial Services Regulation Committee chair, Amanda Cooke, warned that pensions and housing

“draw on the exact same household resources, yet policy treats them as completely separate worlds”.

“While current retirees often rely on property equity to mask savings shortfalls, future generations facing high rents and lower homeownership rates simply won’t have that cushion,”

she continued.

“We need an integrated approach, one that unifies guidance, updates living standards to reflect real housing costs, and unlocks institutional pension capital to help build the homes the UK desperately needs.”

An excellent piece from SPP which you can read from this link. Thanks to Pension Age for publishing this.